LEGAL action by Sir Richard Branson's Virgin Rail has stopped the Government signing a contract awarding a major franchise to a rival bidder, it emerged yesterday.

Rail Minister Theresa Villiers said the Government would "robustly" defend the case following the decision to award the West Coast mainline contract to FirstGroup.

In a written statement she told MPs: "As a result of a legal challenge, which the Government intends to defend robustly, we have not yet signed the contract with First West Coast, and consequently the competition remains live." Virgin Rail has accused Transport Secretary Justine Greening of acting "unlawfully", "irrationally" and against EU law by awarding the £13.3billion contract to FirstGroup.

But Ms Villiers told MPs the bid by FirstGroup, which would rebrand the new franchise First West Coast, would offer "significant improvements" for passengers.

She said: "The West Coast mainline is one of the most important intercity rail passenger routes in the country and it is also a valuable public asset.

As a result of a legal challenge we have not yet signed the contract with First West Coast

In a written statement she told MPs

Over the last decade and more, taxpayers have invested £9billion to upgrade the infrastructure.

"It is a profitable franchise for the current operator and, after significant public investment in the line, the Government is rightly seeking to get a substantial return for passengers and taxpayers."

She added: "The First West Coast bid would provide more trains on the route, with 12,000 extra seats per day from December 2016, new services and station upgrades.

"Taken together, I believe that the commitments in the First West Coast's bid represent significant improvements for passengers and will provide a good return for the taxpayer."

Virgin has made an application for a judicial review of the decision and has lodged papers at the High Court.

FirstGroup has said it wants to proceed "without disruption" and would continue to prepare to start running the franchise on December 9 this year, with the franchise running until 2026.

The West Coast Main Line route serves 31 million passengers a year between London, the West Midlands, the North-west, north Wales and the central belt of Scotland.